March 03, 2017

To Go Boldly Beyond the Arbitration Agreement

The English Commercial Court (the Court) has ruled that it does not have the power to make an order for preservation and disclosure of evidence against a non-party to an arbitration agreement. Accordingly, it cannot grant permission to serve proceedings (seeking this relief) out of jurisdiction against non-parties. Instead, the party seeking disclosure of evidence from a third party should apply to the Court to issue a letter of request to the relevant court. Dtek Trading SA v (1) Sergey Morozov (2) Incolab Services Ukraine LLC [2017] EWHC 94 (Comm).


DTEK Trading SA, was involved in an ongoing arbitration against Steel Mont Trading SA. The arbitration concerned a question of whether or not a cargo of coal was on specification. DTEK argued that the coal in question did not conform to specification. Pursuant to this, DTEK required preservation and inspection of a particular document, held by a third party that was not a party to the arbitration agreement. This document questioned the integrity of a settlement agreement regarding compensation for errors in reports on the specification requirement.

Consequently, DTEK issued an arbitration claim form in the Court, against Sergey Morozov and Incolab Services Ukraine LLC (the Defendants) who were resident outside of the Court’s jurisdiction in Ukraine, seeking relief that they were required to preserve and allow DTEK to inspect the original version of the settlement agreement in question.

Application to the Court

DTEK sought permission of the Court to serve the arbitration claim form on the Defendants outside of the jurisdiction pursuant to rule 62.5 (1) (b) of the Civil Procedure Rules (Service of arbitration claim forms out of the jurisdiction) on the basis that the present claim was for an order under section 44 of the Arbitration Act 1996 (the Act) (Court powers exercisable in support of arbitral proceedings), which includes amongst other things the preservation of evidence.

The issue before the Court was whether the Court had power and discretion to order service of proceedings against the Defendants who were not: (a) parties to the arbitration; and (b) resident in the jurisdiction.

The Judgment

In assessing the position, the Court considered a line of conflicting authorities pre- and post-dating the Act.

The authorities pre-dating the Act followed a rationale that the procedural rules governing this question only applied to parties to an arbitration agreement. Accordingly, the Court did not have jurisdiction.

Whereas, the authorities post-dating the Act placed emphasis on the importance of conserving jurisdictional thresholds and were inclined to the view that service out on non-parties was permissible.

However, the post-Act view was subject to one exception — Cruz City 1 Mauritius Holdings v Unitech Ltd [2014] EWHC 3704 (Comm) [2015] 1 Lloyd’s Rep 191, which was the most recent authority on this question. In Cruz, the Court endorsed the pre-Act view and held that rule 62.5 of the Civil Procedure Rules applies only to parties to an arbitration agreement. This case also emphasised that any doubt as to the jurisdictional limits in question should be resolved in favour of the foreign party.


DTEK’s application was dismissed. It was held that the Court did not have the requisite power to order service of proceedings against a third party out of the jurisdiction as section 44 of the Act should be used for applications between the existing parties to proceedings, and not as a way of involving a third party. Any such application should instead be made by way of a letter of request to the foreign court in question.

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